All Forum Posts by: Ethan Grier

Sorry to revive an older thread, but I feel like I'm missing something. Are FHA loans completely different on Condos than they are on single and multi-family homes? Isn't one of the requirements of qualifying for an FHA loan that you live in the property as your main residence?

If no, what are the differences? 

Like @Michael Goldsmith said, it isn't super clear what you're getting out of this deal. Paying 1500/mo to watch someone work would not be something I would spring for. Don't buy into the 'invest in yourself' guru hype. There are SO many resources available for free. You could spend months if not years learning for free. If you have $10k to spend on a mentorship program, honestly just use that money to buy a deal. 

@Bernard Reisz Very much appreciate the detail. Current personal benefit does seem kind of vague... Would that include things like rental income? I guess I'm kind of at a loss of what would constitute a real estate opportunity that I wouldn't derive current personal benefit from. 

@Yonah Weiss @Kevin S. Thank you both for weighing in. Kevin is correct in the assumption that I am still with the company offering the match. 

To add to the conversation,I remember reading on the forums that with a self-directed 401k you can lend the money to investors, but I'm still hazy on the details regarding if you can actually use that money to purchase property. 

Is it possible to have both a corporate 401k and a self-directed 401k? Depositing money into the corporate one (taking advantage of the company match), and then rolling it over to the self directed one for lending/investing seems like it would be a good strategy, but again, no idea if any of that is possible. 

I look forward to Bernard hopefully chiming in! 

Hey BP, 

I'm trying to figure out options for REI with a 401k. I've read about a few users on BP doing it, but I'm still not entirely sure how it works. The main reason I'm interested in doing this is that my company offers a pretty generous matching program that I'm fully vested in. I'd like to take advantage of it, but I've been holding off due to wanting to use the extra cash to save for a down payment for a house hack in the short term, but in the long term also invest in other rental properties.

If there would be a way to utilize my company match while still investing in real estate, it would supercharge how fast I'd be able to save and invest - I'm just not sure if its possible. 

Does anyone have any experience in this? Thanks in advance. 

For a SFR, you won't be able to qualify for an FHA loan due to not living in it - You'll need at least 20% down for a Freddie/Fannie conventional loan. As far as the ARV goes, I hate to break it to you, but that realtor is trying to sell this house, they're not necessarily on your team or giving you rock solid numbers. Unless the seller is extremely motivated, and willing to sell at 15% under market value (unlikely in current markets, though it might be true for your local market), the ARV likely won't be 150k. If all that was required to create 30k of equity is new paint and new carpets, every investor on this planet would be buying houses, repainting and re-carpeting them, and then selling. Easy 30k cash.

If you're serious about buying and have the funds to prove it, consider bringing on a buyers agent. They're someone thats going to be looking out for your best interest and can provide comps as well. Let them know your intentions about scaling (buying more rentals means more commission checks for them), and they should want to make sure you're able to continue doing business with them. 

Hey Everest, 

First thing that jumps out at me is you considering using an FHA loan - Keep in mind that you only qualify for an FHA loan if you actually live in the property. I'm not sure if this one is a multifamily or not, but keep that in mind. If you're going to live in it and use an FHA loan, I highly recommend you use that as an opportunity to learn how to manage your own property, so instead of putting that 10% towards a PM, I would balance out your other expenses more conservatively.

Second, I strongly recommend steering away from HOA situations. They eat into your cashflow constantly, and can turn a great deal into an okay deal, and an okay deal into a terrible one.

I would re-run the numbers and see what they would look like with just a standard 20-25% down on a Freddie or Fannie loan instead of trying to BRRRR this one. I highly doubt that putting in new carpet and repainting the unit will increase your equity in the home by 50k. If thats the only work you're doing, it also shouldn't cost 10k. If you have 100k cash to use, I would put 20 to 25k towards this property and not bother with BRRRR at all.

The annual growth assumptions don't make a whole lot of sense to me. At the very least, your expense growth (currently at 1%) should account for inflation, which depending on who you talk to, can be 2-4% or higher. In a best case scenario you would scale your income growth (by raising rents) to match or exceed your expenses. 

Overall the numbers you put into the calculator don't make a whole lot of sense to me - it kind of just seems like you made them up. Do you have more information on the actual costs of the property? Aside from painting and carpet, what actually needs to be done? How many units is it? Are you living in one of the units? 

@Julia Ferris I was in a similar boat not to long ago. I ended up opting out of the USDA loan for a few reasons: 

1. USDA loans are specifically for lower income applicants in rural areas intended as a primary residence. They do not accept multi-unit homes (turn off for me). 

2. You can use some funds from USDA to rehab, but its limited to 10% of the loan amount, or 10k, whichever is lower. For the properties I look at, 10k generally would not be enough to do a proper rehab.

As far as owning other properties, I don't believe there is a hard or fast rule, but owning a cashflowing rental might disqualify you as an applicant as far as income/networth is concerned. The second thing to consider is that you have to move into the USDA property within 60 days of your loan closing.

You might want to look into a HML or Bridge loan if you need some kind of short term financing (until you get out of your first property), though without the specifics of the 2nd deal, its hard to say what exactly will work for you. Once you get out of your first property and into your second, you might be able to refinance it into a longer term loan.

All that said, definitely speak with a loan officer for specifics to your own situation. I have a reference if you're serious about figuring out how to do both properties. 

Good luck! 

@Steve Vaughan Congrats on the weight loss bro! My primary short term goal is to take the leap into buying my first property in the next 12 months. I'm leaning towards using a 203k loan and occupying a unit in a MF home, I even have an eye on a property that will cash flow nicely when we end up moving out of it. My smaller steps towards that goal is to get my DtI in order (credit card debt from emergency car repairs), and saving up a 3.5% down payment.

Its all coming together soon! 

@Account Closed I agree about the current margins. Appreciate the insight.